Site Navigation

Site Mobile Navigation

ON G.E. AND EATING OUR SEED CORN

This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996.
To preserve these articles as they originally appeared, The Times does not alter, edit or update them.

Occasionally the digitization process introduces transcription errors or other problems.
Please send reports of such problems to archive_feedback@nytimes.com.

An article May 13 (''Are We Eating Our Seed Corn?'') discussed the extent to which many large American corporations, and the General Electric Company in particular, are buying back their stock and thus spending less on research and development and missing opportunities to develop innovative products. Business executives, members of Congress, academics and other experts on American industrial policy said in the article that such financial engineering often reflects short-term thinking and is sapping American competitiveness. G.E. officials defended the plan to buy back $10 billion of its stock over the next five years, pointing out that the company is a world leader in those fields in which it has chosen to compete and that its research and development is adequately funded.

Some of the letters received in response to the article follow.

G.E.'s Wise Course

To the Editor:

Your article addresses a worthy issue. However, I find the characterization of G.E. disingenuous. They have invested extremely aggressively in their business units. Your analysis indirectly promotes diversification, for which you would likely subsequently critique G.E. for being an unrelated conglomerate.

In their main businesses, multiple examples exist of aggressive investments of tens or hundreds of millions of dollars in advance of competitors and/or market and customer requirements. In aircraft engines, they have developed the efficient unducted fan engine which customers are not yet ready to invest in. In medical systems, they are investing heavily in positron-emission tomography , again in anticipation of customer needs. Although it turned out badly, in major applicances they invested in the new generation of radial compressors rather than resort to sources outside the United States. It is difficult to cite examples of main businesses in which G.E. has not invested fully. Presumably that is why you highlighted the ''maglev'' train example - an area where true market demand is questionable and a business where G.E. has likely not recovered its last major automation technology investment due to lack of market demand.

G.E. is apparently trying to avoid the trap of being labeled a conglomerate. By running its main businesses very effectively, it finds itself generating significant amounts of cash. I believe it is unreasonable to criticize G.E. management for returning this cash to shareholders, rather than potentially squandering it on diversification.

WILLIAM M. ZIEGLER

Brooklyn, N.Y., May 17

The writer, now employed by a management consulting firm, was previously a G.E. employee.

A version of this letter appears in print on May 27, 1990, on Page 3003007 of the National edition with the headline: ON G.E. AND EATING OUR SEED CORN. Order Reprints|Today's Paper|Subscribe